Southwest Details Potential Boeing Strike Impacts, MAX 7 Expectations

Should Boeing’s machinist strike continue for much longer, Southwest Airlines will have to take a hard look at its plans for 2025.

The Dallas-based carrier had planned for a strike roughly in the five-week range, CEO Bob Jordan shared on an Oct. 24 earnings call. It is now entering its sixth week. “If the strike goes much longer, there will be an impact,” Jordan told analysts and investors, one that will make it harder to hit the higher end of a capacity guidance projecting modest growth of 1%-2% in 2025.

Should the work stoppage drag on, “we’ll look at our fleet opportunities in terms of what we can do and maintain capacity sets,” Jordan said. “We have options to manage this within our fleet, but at some point, you have to moderate the capacity and schedules. We’re just not there yet.”

Boeing employees represented by the International Association of Machinists and Aerospace Workers (IAM) have voted down the latest contract offer, with 64% in favor of continuing the strike—action that began Sept. 13.

Not including options, Southwest has almost 500 Boeing 737 MAX aircraft on order (293 -7s and 204 -8s), according to the Aviation Week Network Fleet Discovery database. Expecting the -7 to be certified in the middle of 2025 and accounting for a six-month lag for necessary integration work, the variant could enter Southwest’s revenue services in 2026. The airline’s engineers have confidence in the technical changes proposed to solve the engine anti-ice issue, noted COO Andrew Watterson, which is now undergoing tests.

“Our plan for next year does not include the MAX 7,” confirmed Watterson. “But our plan for the following year could.”

Given its ongoing discussions with Boeing and expected aircraft delays, Southwest continues to plan for approximately 20 737-8 deliveries in 2024, having received 19 so far this year. During the third quarter (Q3), it took delivery of nine -8s and retired 15 aircraft, with plans to retire six additional 737 NGs in 2024. By year’s end Southwest expects to have retired 37 -700s and four -800s, as it works towards having an all-MAX fleet by the end of 2031.

Reporting progress on initiatives being pursued as part of a transformation plan, Southwest in Q3 saw its operating revenues increase 5.3% year-over-year to $6.9 billion on a 6.6% uptick in total operating expenses. Net income for the quarter was $67 million, versus the year-ago quarter’s $193 million.

“Everything is progressing in line with what is needed to hit our 2025 commitments,” said Jordan, confident in the execution of Southwest’s three-year plan. Record quarterly operating revenues and a 2.8% improvement in unit revenue “reflects both a more constructive industry backdrop and a proof point of our effective execution—improvements resulting from our revenue management actions are particularly encouraging,” he said.

Southwest is currently working with regulatory agencies and vendors to achieve approval and certification of its previously announced new premium cabin configurations to allow aircraft retrofits to begin early next year. Starting with its largest aircraft, it expects to retrofit 50-100 aircraft per month, completing the work in late 2025. It has also narrowed the launch date of an upcoming partnership with Icelandair to the first quarter of 2025.

In the fourth quarter, the carrier projects unit revenues to increase 3.5%-5.5% year-over-year, on a 4% decrease in capacity. In the first quarter of 2025, it expects capacity to decrease by 1%-3% year-over-year, while continuing to anticipate annual capacity growth in 2025, 2026, and 2027 of 1%- 2%, funded through improvements in aircraft turn time and its upcoming launch of redeye flights.

Southwest has also reached a settlement with Elliott Investment Management on leadership changes the vocal large investor had been pushing for since June. Under the agreement, Southwest will add five of 10 candidates the fund originally proposed, part of a slate of six new directors set to replace an equal number already stepping down on Nov. 1.

Executive chairman Gary Kelly will also retire Nov. 1, a date moved up from spring 2025.